Franchising is a great way for people, groups of investors or business entities to own a business. This is because there are many advantages and opportunities that it can provide. There are many different ways that the relationship with the franchisor can work depending on many factors such as the category, the size of the business and more.
This is one of the most common methods taken for franchise ownership. As the name implies, this is a person or entity that buys the rights to open one franchise. This is sometimes also referred to as a direct unit franchise. It is a simple way to handle the franchise process. There are a few weaknesses that this system for franchise growth can present, such as:
As the single unit franchise prospers, many franchisees want to invest in a second location. This is great for everyone involved. There is already an established relationship between the franchisor and franchisee. The franchisee also has a better understanding of what they can earn and how much of an investment they will need.
More than this, they already know how to operate the business, so there is no need for training with the new location, which can cut costs for both the franchisor and the franchisee. They may even be able to utilize some of their current staff for the new location, making the transition easier.
The relationship between the franchisor and the franchisee doesn’t change much when a new franchise is purchased. However, this is different than the relationship than the one a franchisor will have with a franchisee that plans to buy multiple locations right from the beginning. In most cases, single unit franchises do not receive reduced fees or may even have to share a market with other franchisees. When you start out knowing you will plan on more locations, you may get more individualized attention from your franchisor and will have several other benefits.
There will be times when the franchisor will update the franchise agreement you have with them. This could be for a number of reasons such as a change in the responsibilities of the parties involved or even just to change the time frame for updating equipment within the franchise location. As more franchise locations are purchased, the franchise agreement will evolve and will have only certain elements of the original contract.